what would you do with $20,000?

10 Replies

Depends on your market, but that is probably enough to do an FHA house hack or even a SFR if you can find things under $100k in the area you are looking.

Originally posted by @Jason Golliday :

I've been saving and have established some good credit, what now? what would you do? should i just keep on saving or go ahead and jump in?

 That's a loaded question. It depends on what your goals are? Short term? Long term? Income? Growth? Before you spend any money you should spend your money and may out what you want to achieve and how you are going to get there.  

Originally posted by @Aaron K. :

Depends on your market, but that is probably enough to do an FHA house hack or even a SFR if you can find things under $100k in the area you are looking.

Eh, $20k can get you into something around $350k, depending on this that and the other, using FHA, without making unusual/crazy assumptions. (Using "Greater SF Bay Area" assumptions here, assuming no big city Oakland/Berkeley/SF transfer tax, I don't know Texas so can't comment on that)

A lot of the closing costs do not scale up and down in a linear fashion with purchase price. Those flat costs mean that -- using the same assumptions for both -- $10k gets you into a $100k home, $20k into $350k... twice as much money, 3.5x the buying power.

Once you get over that first hurdle of whatever your local flat-ish closing costs are, you're leveraging at a ratio of about 20 to 1 from there on out. Checking the math on that ratio I just made up, the same person with $30k would get into a $550k house... $10k yields an extra $200k in buying power, yup, that's about 20 to 1. It'll be less than 20:1 if you start looking in a city with a city transfer tax, the above 3 examples, Los Angeles, and Sacramento, being examples (OP is in Texas and OP should find a Texas LO to get Texas-specific numbers, I'm only qualified to comment on what I see in CA). 

Jump in now. See if you can find a duplex or four plex that you can buy and rent out the other units. This will have a snowball effect and help you gain every month. Remember you have one to three other people paying your rent. If you get to the point that you entire mortgage is paid via the renters save the amount you were paying in rent to buy the next piece. 

@Jason Golliday

My 2c.

Step 1: Locate a 150K neighborhood and reach out to the owners.

Step 2: Find ONE seller willing to carry a note, for 12 years. Try to find those properties that do not need tons of work.The ideal is to flip these quick, not spend 60-90 days fixing stuff. 

Step 3: Put 5-10K Down, but no more. 

Step 4: Negotiate terms somewhere in this range:  12 years 4-5% interest 5-7% down. How likely is this in Texas? Pretty likely, I close on 3 of them within the next 45 days. Just depends on how fast you want it.

Step 5: Wrap the note to a willing qualified buyer. 

Step 6: Non-negotiable terms to buyer:  12-15 years 9-9.5% interest 7-10% down. How easy is it to find a qualified buyer, in Texas? I already have 2 buyers for those properties, and I haven't even closed on them. I will have the 3rd either by closing, or within 2 weeks of closing. 

Step 7: Rinse and Repeat. Except now you will be using the buyer's down payment, for your down payment going forward. Do this 10x You will have leveraged a 1.5m portfolio, for 5-10K cash. 

But this is just the beginning of the great news. Presuming all of your notes are written as follows: 150k Principal

10% Down

9.5% Interest

15 Year Terms

Drum Roll please.......$1,187,466 in interest collected for 5-10K Cash, in 15 Years!

That is the reason why banks invest in notes, not Real Estate. 

As far as the remaining 10-15K of your 20K, go on vacation?

or....

Take out 10 mortgages and pay the bank, the 100s of thousands in interest...

Originally posted by @Jason Golliday :

I've been saving and have established some good credit, what now? what would you do? should i just keep on saving or go ahead and jump in?

 you should ignore all the "offers" and "deals" that are filling your inbox...

What would I do with 20k? Hmmm.... I would do the same thing that I would do if I had an extra 10k, or 100k. I would plug it into the system I’m working right now and continue to acquire properties. Not a lot would be different. I’m not trying to be snarky. The reason I’m saying this is to point out that the system is more important to your success than the cash. A little bit of cash into a good system is likely to produce good returns. While a lot of cash into a bad system will likely make you lose money. So I would encourage you to create a system (modeled after someone else’s system that works) that will create wealth. 

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